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View from India: Financial inclusion for all through better design and distribution

Image credit: Sayan Nath on Unsplash

As a tool, fintech has been deployed by the government to improve operational efficiencies. However, tailored solutions are required for the financial inclusion of those citizens that are harder to reach.

When we look at the evolution of fintech in the country, there are two kinds of Indians who don’t go to banks. The first are the people who transact online, from home, office or anywhere and don’t necessarily go to a bank. The second are the unbanked people who don’t have enough money to open an account.

This second group often turns to informal platforms for loans. “Our vision is to rebuild India’s financial operating system to reach to the next 500 million people representing the category of unbanked people,” said Sahil Kini, chief executive officer and founder of Setu, an API (Application Programming Interface) infrastructure company.

Financial inclusion is crucial to economic growth. Key drivers of financial services like formal credits and loans, investments and insurance should reach the unbanked masses. “The lagging indicators of financial penetration include the fact that 95 per cent of credit products are EMIs (equated monthly installments) and only 10 per cent of the population has access to periodic income.

"Around 88 per cent of our population use mobile phones for payments and making purchases,” added Kini, who was part of the India Stack team that has created a financial technology revolution through UPI or Unified Payments Interface, Goods and Services Tax Network (GSTN) and Aadhaar. 

Design and distribution are road blocks for financial inclusion. Financial products with a flexible tenure should replace cookie-cutter options. Financial products should be tailored depending on the individual’s occupation. This is because the farmer’s cash flow is different from that of the trader and the daily wage labourer. Generally, banks and non-banking financial services companies tend to have a standard set of both intermediaries and distribution strategy.

Setu is working with financial institutions to unbundle their financial infrastructure to offer a different suite of financial products that suit the requirement. This is for the unbanked masses and will happen through a distribution network. It also includes digital KYC (know your customer) overdraft accounts, fixed deposits benefit cards and bill payments. “We need to democratise funds for all,” summed up Kini. 

Democratisation of funds is essential because India is a heterogeneous market, stratified by per capita income. Consequently, technology should be used effectively for inclusive development. “Over 41 per cent of our population is in the age group of 25-54 years. The income pyramid reveals that the next billion opportunity lies in the middle-income group who are mostly from tier cities. 90 per cent of our new internet users are from tier cities,” observed Jeyandran Venugopal, chief product and technology officer at Flipkart.

The middle-income consumer is value conscious, so the e-commerce company is packaging services with an accent on pricing and convenience. “India is a leader in digital inclusion and has added over 40 million internet users on a yearly average since 2013. But the country has more than 19,000 postal pin codes and many addresses are not systematised,” added Venugopal. The company has developed intelligent geo-coding systems using artificial intelligence and machine learning.

Saathi, Flipkart’s 2019 offering, is a smart assistive-interface feature in English and Hindi. With text and audio-based instructions, Saathi simulates a real-life shopping experience as rendered by a salesperson. “As per Google, voice search has 300-plus year-on-year growth and 40 per cent of internet consumers use voice as a search mechanism,” he explained. Flipkart has introduced a Hindi interface. The 2019 initiative aims to tap the next 200 million customers. Research revealed that inclusivity and engagement with native shoppers happens through a local dialect.  

Flipkart also gets mobile traffic, which is why the apps should be as light as possible. The adoption of mixed mode pages is on the rise. Trust markers on page and seller and video-rating displays are introduced for emotional consumer connects. Other attractions include chat bots, brought in for a retail store experience.

In the near future, Flipkart is likely to leverage drone technology to scale last-mile delivery. As of now, huge warehouses rely on radio frequency identification (RFID) and drone technology to execute stocktaking procedures.

In a nutshell, the innovation explosion has been positive. This has led to the creation of new business models, besides enriching the economic landscape. The next stage of growth will benefit from innovation.

However, innovation also brings us to issues related to the flow of content across geographical boundaries. This raises concerns about privacy and security. Facial-recognition software needs to be made available on a large scale to augment content-related transactions.

Content gets picked up by artificial intelligence and automated systems. It’s only natural that the thrust is on AI governance, which revolves around commercial, social and military aspects for national security. Matters concerning AI governance and security will open up new avenues for employment.

These insights were shared at Carnegie India’s fourth annual Global Technology Summit (GTS). The event was supported by the Ministry of External Affairs and the Government of Karnataka.

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